It seems rather strange to rescind citizenship because of tax issues, aren't there qualified tax advisors that can handle all of that for you? At least here in Germany they are quite affordable and usually pay for themselves because of the tax savings you get due to their advice. If you consult one you can also be rather confident that you don't accidentally forget about some new regulation.
For many people it isn't about taxes. It's the fact that due to FATCA they can't even have a bank account in the country where they have lived and worked for many years. Banks in some countries have closed the accounts of US citizens due to the cost of compliance with FATCA. Imagine suddenly being unable to cash your paycheck or pay your bills because as a US citizen you are a pariah to the banks of the country in which you live..
Cashing a paycheck is largely non-issue as cheques are almost gone in Europe (except France, UK and Ireland - but they're soon to be gone there too) - see https://en.wikipedia.org/wiki/Cheque#Europe
But it makes the problem even bigger, because there is a push to go cashless (like fines if you pay cash over a certain amount - starting around 10k euro) and it's working - Sweden has 40% less currency in circulation than 10 years ago.
You need a tax advisor/accountant who is qualified in both the US and Germany and has knowledge of cross-jurisdiction issues. These people are expensive. Until now, only big corporations needed such advisors.
In Germany they are commonplace because the German system is the most intricate snake nest of paperwork and bureaucracy. Love the country, but jesus christ how could the system ever be navigated by one person, let alone a foreigner?
Is Germany really as convoluted, or more convoluted, than the US case law, the patchwork of local tax legislation in the US, or the US tax code, for example? I never understood how those things could ever be navigated by one person.
My ex and I used to use the same accountant to file our taxes. As a Canadian citizen, our accountant charged me $100CDN, my ex who had joint US/Canadian Citizen was charged $500-$2000CDN depending on the year and the amount of work that needed to be done.
So, yeah, there are qualified tax advisors who can help but it's painful.
and even after that $2k is gone every year, you're still not sure you can't be fined.
I've had to fix my taxes every year that i had paid Ernest & young to prepare them for me. had i trusted them blindly as most people do, I'd be subject to a couple $20k fines. of course, those depends on you being big/of interest enough to be bothered by the irs. but i like to have clean books and not count on luck.
That's the real problem with the IRS. I've made mistakes on my taxes before and got a "Oops, you owe us $2000 more, pay by XXX to avoid interest and penalties" from the CRA. The IRS jumps straight to large fines and penalties, especially for ex-pats.
For simple cases like a German with only German income filing in Germany, yes. But you do that yourself, if you spend a few hours reading up on the deductions. In the case of the OP, there is no 'upside' (i.e., potential to get a return if your deductions are high enough); it'll cost you if you made any money, regardless of whether it's been taxed already elsewhere. Plus what the others have said.
